South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.

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Wednesday, November 27, 2013

Repsol Likely To Accept Argentina's $5bn YPF Compensation Offer

Last updated:November 26, 2013 6:51 pm

Repsol likely to accept Argentina’s $5bn YPF compensation offer

By Miles Johnson in Madrid and Benedict Mander in Buenos Aires

The board of Repsol is poised to accept an offer of $5bn compensation from the Argentine government for the nationalisation of its YPF subsidiary in a move that will draw a line under a bitter year-long diplomatic stand-off with Madrid.

The Spanish oil company’s management, under pressure from its largest shareholders, has agreed in principle to settle the legal battle over Argentina’sseizure of its majority stake in YPF but is demanding guarantees over how the $5bn will be paid, people close to the situation said.

IN OIL & GAS

While the final details of a deal have not yet been decided ahead of a Repsol board meeting on Wednesday, Argentina has indicated to the company and the Spanish government that it would pay the $5bn using its own government debt.

As a consequence of Argentina’s default at the turn of the century, the country is still being pursued by a long line of international creditors and Repsol’s management is seeking legal assurances that any payment would be enforceable, people close to the talks said.

Repsol, which saw its shares jump more than 4 per cent on news of a possible deal, declined to comment.

If the deal goes ahead, it could help to unlock billions of dollars of investment that YPF is seeking to develop its Vaca Muerta shale reserves, which are among the world’s largest unconventional oil and gas deposits.

An increase in energy production would help Argentina reverse a growing energy deficit, which is putting pressure on rapidly dwindling foreign exchange reserves, jeopardising the stability of the government of President Cristina Fernández.

The populist government seized majority control of YPF, the country’s former state oil company, after accusing Repsol of failing to invest sufficiently in its assets as Buenos Aires moved to alleviate rising fuel prices.

The heads of Repsol’s two largest investors, the Catalan bank Caixabank and Pemex, Mexico’s state oil company, attended a meeting in Buenos Aires on Monday with Argentina’s economy minister Axel Kicillof, Spain’s industry minister José Manuel Soria and three Repsol executives.

The meeting marked a conciliation between Buenos Aires and Madrid after months of tension, with Mr Kicillof having led the drive to nationalise YPF last year and Mr Soria having warned Argentina of “serious consequences” before the seizure took place.

While Mr Brufau was not present at the meeting, people close to Repsol’s management said he had personally approved the envoy being sent to Argentina and welcomed an agreement.

In June Repsol’s board voted against an earlier $5bn compensation proposal from YPF which involved the payment of $1.5bn in Argentina-backed debt, and a stake in the Vaca Muerta shale formation, valued by Buenos Aires at $3.5bn.

Relations between Mr Brufau and Isidro Fainé, chairman of Caixabank and deputy chairman of Repsol, who brokered the earlier rejected deal, have been strained by disagreement over how to settle the YPF issue.

Mr Fainé, who had previously travelled to Argentina to meet Ms Fernández, did not turn up to the Repsol board meeting when the proposal he had helped design was unanimously rejected.

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Jack's South America

I started my South American adventure in 1973 in Chile. I had the misfortune to arrive a couple of days before General Pinochet staged his military coup and took power from Salvador Allende. I found myself staying at the Sheraton Hotel in Santiago. As the coup unfolded all sorts of men in US Army officer's uniforms appeared. Even more sinister were men with elegant designer slacks, silk shirts, and Rolex President watches. I knew from my days in Vietnam that they were part of the CIA Phoenix Program team. These people had been responsible for political kidnappings and assassinations in Vietnam. I was asked what I was doing there and my military record checked with the Pentagon. I did not end up in the infamous soccer stadium where many people were executed including two Americans.

I went on to spend 2 years in Peru and Five years in Brasil where I lived through the awful days of the military dictatorships.

It all was not sadness and war. I met many wonderful people who had to survive under difficult circumstances. I came to love and admire them. South America always has a special place in my heart. My first wife was from Brasil and my dear wife Elena is from Buenos Aires.

About Me

When I was a very young man I had an incredible grandmother named Sarah Elizabeth Walters. She told me the following words: "Son don't let the grass grow under your feet." I took those words to heart and went out to see the world. My life has been ana adventure all over the world. I have lived on six of the seven continents. I have been lucky to live this long.